New Zealanders divided on retirement age lift

New Zealanders are divided about raising the retirement age, an ASB survey has found.

The quarterly ASB KiwiSaver Survey has found 20% of respondents strongly disagree with the Government’s proposal to gradually increase the age of eligibility for superannuation from 65 to 67 by 2040.

This compares to only 11 % that strongly agree.

In between these strong views, 28% are neutral, with others agreeing and disagreeing less strongly (see table below).

It is ASB’s first KiwiSaver survey since Prime Minister Bill English announced the proposal to raise the age for state superannuation, from 65 to 67, in gradual steps between 2037 and 2040.

ASB asked how strongly people agreed or disagreed with this proposal to gauge opinion in the lead-up to the September election.

ASB senior wealth economist Chris Tennent-Brown says surprisingly, the strongest disagreement comes from those in older age groups who are closer to retirement and would not be impacted by the proposed change.

ASB found 27% of people aged 50-59 strongly disagreed with the proposed change, and only 9% agreed.

“The variance by age group is interesting. But I think it shows people are answering the question realistically, rather than selfishly,” Tennent-Brown says.

“There also seems to be a large group of people who are sitting on the fence (28%). The survey highlights the wide range of views on the issue and it will be interesting to see if the retirement age debate comes up again during the election campaign.”

Kiwisaver usage remains high

ASB’s quarterly KiwiSaver survey asks a range of questions about KiwiSaver and is based on 773 online interviews with adults aged 18 years and older across New Zealand during Q2 2017.

It reveals KiwiSaver continues to be one of the key investments for New Zealanders, ranking as the second most commonly-used investment behind bank savings accounts, ahead of housing.

The KiwiSaver index remains stable this quarter at the high point of 24%. This means only one quarter of respondents feel they are competent in terms of their knowledge of KiwiSaver.

“The scheme is now 10 years old and this statistic suggests the industry can’t rest on its laurels – there is clearly plenty of work to do to continue to lift engagement and competency and to make sure people are getting the right information to make informed decisions about being in the most appropriate KiwiSaver fund for their needs,” Tennent-Brown says.

Retirement planning

Financial planning for retirement remained relatively stable over the previous year. The proportion of people who believe they need to save more for their retirement has fallen from 64% to 60% since Q3 2016.

“Investors in growth-oriented funds should have seen their balances rise strongly over the last year as growth assets have performed well, and this may be helping those investors feel they are on track for retirement.”

Fund switching

Better returns continues to be the highest reason to switch KiwiSaver providers, with 29% of switchers changing provider for this reason. In addition, fund performance is cited as the key reason for satisfaction with KiwiSaver overall.

“Performances varied greatly over the last year. The funds with exposure to growth assets tend to have done a lot better than those that are mainly income assets. Over the past year, growth funds have returned around 10%, whereas the very conservative funds or cash funds have recorded returns in the 1.5% to 4% region,” Tennent-Brown says.

The most popular KiwiSaver fund is the balanced fund, which makes up 1 in 3 (31%) KiwiSaver funds. Just under half of the KiwiSaver users say their fund was chosen because they feel it is the best fund to help them save for retirement.

“It’s important for people to understand what types of assets their KiwiSaver fund invests in, and what it means for past performance and expected returns. For savers who are in a default fund and have not yet made an active choice, it’s really important to check-in and make sure they are in the right fund and maximising the benefits of KiwiSaver.”